Debate over Revising Goodwill Accounting Rules Continues
On March 2, FASB continued hammering out revisions it aims to propose about the reporting of identifiable intangible assets and subsequent accounting for goodwill. The discussions focused on whether certain types of goodwill—reorganization, subsidiary including pushdown, equity method—should remain within the scope of the subsequent accounting guidance for goodwill in ASC 350-20, Intangibles—Goodwill and Other—Goodwill. The board will also determine which types of identifiable intangible assets should continue to be recognized separately from goodwill. The discussions took place a week after Acting SEC Chief Accountant Paul Munter suggested that the board would need to be sure that change is warranted for the rules, because investor views are very diverse. “We emphasize the importance of a robust process and analysis to make the case for any changes in the accounting for goodwill, which would include, among other things, the extent to which international convergence in this area is necessary or appropriate in the public interest,” Munter said in statement.
Narrow Amendment to Lease Accounting Rules Coming
The IASB voted to issue a narrow amendment to lease accounting rules to add specific guidance on how to subsequently measure leaseback liabilities. The amendment will be to IFRS 16, Leases, and will be published in this year’s third quarter, according to the discussions. The provisions will apply to sale and leaseback transactions with variable payments occurring since 2019. An example would be when an entity (seller-lessee) that enters into a sale and leaseback transaction whereby it transfers an item of property, plant and equipment (PPE) to another entity (buyer-lessor) and leases the asset back for five years. The guidance was developed because IFRS 16 includes no specific subsequent measurement requirements for sale and leaseback transactions. As a result, it is not always clear how to subsequently measure the leaseback liability, in particular when the leaseback payments include variable payments linked to future performance or use of the underlying asset, which are excluded from the measurement of a lease liability. Companies will be required to apply the rules to annual reporting periods beginning on or after January 1, 2024, about 15 months after issuance. Earlier application is permitted.
Too Early to Add ‘Crypto’ Rules to Private Company Standard.
On February 24, the IASB announced it is too early to add cryptocurrency reporting rules to the IFRS for SMEs standard because companies in the jurisdictions that use the standard are not seeing wide use of digital assets. The work would have determined how small and medium-sized private companies would report assets such as Bitcoin and Ethereum in their financial statements. Board members stressed that the topic should first be addressed under full IFRS standards, before it would be included in a simpler standard for private companies. “I strongly think there is no way that we can address this in the SME standard before we’ve even started addressing this as a board for big IFRS,” IASB member Bruce Mackenzie said. “I think there’s a big risk that what we could decide in the SME standard could end up being subsequently changed once this board, if it chooses to, addresses cryptos going forward,” he said. “At this stage, I don’t think we have a basis for going forward and start cutting edge development of accounting for cryptos in this project.” IFRS for SMEs is a self-contained package of international accounting rules that was developed in 2009 for companies that do not have public accountability and publish general purpose financial statements for external users. The rules are tailored from full IFRS to provide a simpler, less costly package of guidance for private companies. More than 80 countries, including the United States, permit the use of IFRS for SMEs. The board’s decision on cryptocurrencies is in line with the SME Implementation Group (SMEIG), an advisory panel that discussed the topic in January.